Forex Flash: Potential EUR correction support XAU/EUR long idea - Saxo Bank

FXstreet.com (Barcelona) - Ole Hansen, Head of Commodity Strategy at Saxo Bank, sees potential to enter a long position in XAUEUR at current levels, with initial stop at 1,237 (December low), aiming for 1285, January high. The analyst adds that the trade can be played as a combination of "buying XAUUSD and selling EURUSD for an equivalent amount."

According to Mr. Hansen: "Gold continues to consolidate while the euro looking overbought. The price of XAUUSD has spent the last few days consolidating following the sell-off last week. We have so far managed a couple of closes above the 200-day SMA, currently at 1662, which has become a point around which most of the action has been seen during the last month. In order for gold to turn properly bullish we need to see a technical break above 1710 USD/oz and while we wait for that to happen eventually, some better opportunities may be provided by the XAUEUR."

Ole notes the following risk: "EUR continues to rally while a correction against the dollar carries the risk of dragging XAUUSD lower which is why the stop is located just below the recent lows as trend-line support from October 2011 would be broken."